Inheritance Tax (IHT) Calculator
Enter the estate value and, if a home is being left to children or grandchildren, its value — the calculator applies the £325,000 nil-rate band, the residence nil-rate band and the £2 million taper, then shows the 40% charge on the remainder. It is a single-estate estimate: spouse transfers, lifetime gifts and reliefs are flagged but not modelled.
How it works
Every estate has a £325,000 nil-rate band taxed at 0%. If a home (or share of one) passes to direct descendants — children, grandchildren, step and adopted children — an additional residence nil-rate band of up to £175,000 applies, capped at the home's value. Both bands are frozen until at least 2030.
Worked example: a £600,000 estate including a £250,000 home left to the children. The £325,000 nil-rate band plus the full £175,000 residence band shelter £500,000, leaving £100,000 taxed at 40% — a £40,000 bill. If the same estate went entirely to a sibling instead, the residence band would not apply: £275,000 would be taxable and the bill £110,000.
The residence band is capped at the value of the home itself: leave a £120,000 flat to your children and the residence band is £120,000, not £175,000, for £445,000 of total shelter. At the other end, large estates lose it — a £2.2 million estate keeps only £75,000 of residence band, so £1.8 million is taxable and the charge is £720,000.
Estates worth over £2 million lose £1 of residence band for every £2 above that line, so it disappears entirely by £2.35m. Whatever exceeds your combined bands is taxed at 40% (36% if 10%+ of the net estate goes to charity — not included in this estimate).
Married couples and civil partners inherit each other tax-free, and unused bands transfer to the survivor — a couple can pass on up to £1 million combined. This calculator estimates a single estate without spouse transfers, lifetime gifts (7-year rule) or business/agricultural reliefs; for estates near the thresholds, professional advice pays for itself.
Common misreadings: the £1 million "couple's allowance" is not automatic — it needs both partners' nil-rate and residence bands, which in turn requires a home worth at least £350,000 passing to direct descendants (2 × £325,000 + 2 × £175,000); the standard £325,000 band is never tapered, only the residence band; and because all bands are frozen until at least 2030, ordinary growth in asset values quietly pulls more estates over the line each year without any rule changing.
From April 2027 unused pension pots are due to come into the IHT net — a major announced change worth planning for now.
FAQ
How much can I leave tax-free?
At least £325,000 (nil-rate band). Leaving your home to children or grandchildren adds up to £175,000 more — £500,000 total. A married couple combining both sets of bands can leave up to £1 million tax-free. All figures are frozen until at least 2030, which quietly drags more estates into the net each year.
What is the residence nil-rate band taper?
Estates over £2 million lose £1 of residence nil-rate band per £2 of excess. A £2.2m estate keeps only £75,000 of the £175,000 band; at £2.35m it is gone entirely. The standard £325,000 band is never tapered.
Do gifts made before death count?
Gifts made within 7 years of death are added back into the estate (with taper relief on the tax after 3 years). Gifts from surplus income, £3,000 annual gifts and small gifts are immediately exempt. This calculator does not model gifts — significant lifetime giving needs specific advice.
Will pensions really be subject to IHT from 2027?
That is the announced plan: from April 2027 unused pension funds are due to be included in the taxable estate, removing today's main IHT shelter. If your planning relies on leaving a pension untouched, review it before then — the change is expected to bring many more estates over the threshold.
How much inheritance tax is due on a £600,000 estate?
It depends where it goes. Left to children with a home worth £175,000 or more included: £500,000 is sheltered and the bill is £40,000. With no home passing to direct descendants, only the £325,000 band applies — £275,000 is taxable and the bill is £110,000. Left entirely to a spouse or civil partner: nothing, since spouse transfers are tax-free and the unused bands pass to the survivor.
Who counts as a direct descendant for the residence band?
Children, grandchildren, step-children and adopted children — the residence nil-rate band only applies when the home (or a share of it) passes to this group. Leaving your home to siblings, nieces, nephews or friends does not qualify, however close the relationship, so the estate falls back on the standard £325,000 band alone.
What is the reduced charity rate?
If 10% or more of the net estate is left to charity, the rate on the taxable remainder drops from 40% to 36%. This calculator does not include the charity rate in its estimate, so a will with substantial charitable gifts will show a higher figure here than the true liability — one of several reasons estates near the thresholds justify professional advice.
Are the £325,000 and £175,000 bands going up?
No — both are frozen until at least 2030, and freezing is itself a quiet form of tax rise: as asset values grow while the bands stand still, estates that were comfortably below the line drift over it, dragging more families into the net each year without any rule changing. Under frozen bands, reviewing your position every few years matters more than it used to.